Thursday, July 30, 2015

Despite Twitter beating wall street’s expectations by posting impressive
revenue numbers and even a profit in its 2nd quarterly report, the
social networking company was punished by Wall Street as Twitter’s stock
dropped 11% with investors less than impressed with its slowing user growth.

User growth has been a constant thorn in the side of Twitter’s executive
team and has seem the company’s stock backslide an incredible 34% in last the
three months[1]. This really shouldn’t be surprise
as investors have consistently shown concern about Twitter slower user growth and
the company’s senior leadership appearing to be short on ideas on how to tackle
a problem that threatens its business.

What also maybe rattling investors is the company’s shrinking ad revenue
growth which was at 72% in Q1 but is now 63% in Q2. It’s been pretty much
downhill for the company since they went public as their Wall Street investors
have been dismayed by Twitter’s ineffective product strategy and generally how
the company has been managed which sealed former CEO Dick Costolo’s fate last
month. Twitter is showing all the signs of a company in trouble with its high
employee turnover among senior management as, according to the Financial Times,
Twitter has lost “more than 450 employees -- 12% of the company's staff “

Any company that reports a turnover that high over a year signals that even
Twitter employees aren’t sold on the executive team’s plans to turn the company
around and was clearly under the impression that they were on sinking ship. Just
yesterday Twitter lost two executives to Dropbox and Google which clearly shows
that former and now current interim CEO Jack Dorsey clearly wasn’t happy with
his product management staff but it’s hard to tell whether he wanted to show
Wall Street that he’s taking action to fix company’s forlorn product strategy
or the continuing brain drain that is their employee turnover.

Nonetheless, it seems Dorsey is knows that Twitter has failed so far to market
itself effectively and is currently looking for a Chief Marketing Officer to drive
home Twitter’s value proposition to capture in key markets. However this only
brings to light the state of the company as the Chief Marketing Officer role is
currently filled by their Chief Financial Officer Anthony Noto. Why a company
that struggles to market itself would let their CFO moonlight as their CMO is a
mystery and gives credence to Peter Thiel’s well held opinion that Twitter is “horribly
mismanaged”[2]. Twitter have been looking
for a CMO for months now with no luck which suggests that the company is
struggling to attract talent maybe because candidates take a look at the high
turnover rate among senior executives and get the sense that they won’t get
enough time to address the company’s user growth problem.

In sum, Twitter is not in good shape and whoever eventually takes over the reins
from Dorsey is going to have his or her work cut for them.

Saturday, July 25, 2015

The decision to sell the
Financial Times seemed strange as it boggled the mind as to why Pearson would
want to sell a famous and respected British media institution it’s owned for 58
years that’s making money in an age where most media entities are bleeding
money. The only reasoning behind the FT sale that makes sense is that the
education and publishing giant is looking to focus more on its profitable
education business and slowly wind down its media publishing business which
might also explain why Pearson is also looking to let the publishers of The
Economist buy them out of their 50% stake in the magazine.

While it is jarring to see
Pearson effectively wash its hands off two famous and respected British economic
and financial magazines, Pearson have not been shy in stating its ambition to
transition from its roots as a publisher into, in its own words, a “learning
company”. In truth, the sale of FT was no surprise as the moment John Fallon
became CEO of Pearson, the company’s transition into a full fledged learning and
education company was a done deal. There was speculation even back in 2012
about who will buy the financial Times from Pearson with news media giants such
as Bloomberg, Thomas Reuters Group and Rupert Murdoch rumored to be frame of to
take the FT off Pearson’s hands.

The only real surprise is that
Nikkei ended up buying the FT. A suggestion mentioned by the guardian suggests
that the FT sale was based on the incredible circulation numbers in japan as “the
Nikkei newspaper, Japan’s equivalent of the Financial Times, sells 3m
broadsheet print copies a day – compared with 2m for the tabloid Daily Mail in
the UK and a mere 200,000 for the FT itself”[1].
While this represents a great opportunity for Financial Times, it only begs the
question why Pearson sold the Financial Times as it’s one of the few media
operations that makes money mostly from its content thanks to strong subscriber
base.

But looking at Pearson’s recent
financial performance, the real reason Pearson sold the Financial Times becomes
clear. Pearson suffers from growing net debt and a serious contraction in returns
as Pearson was making 10.3% on invested capital in 2010 but only saw a 5.6%
return in 2014. Pearson clearly didn’t see the Financial Times or the media
business in general as ripe for growth which is evident in Fallon’s blog post
as he noted:

“We are at an inflection point in global
media. The pace of disruptive change in new technology — in particular, the
explosive growth of mobile and social media — poses a direct challenge to how
the FT produces and sells its journalism. It presents the FT with a great
opportunity too — to reach more readers than ever before, in new and exciting ways”[2]

Fallon citing disruption on the
media industry as a rationale for selling the FT doesn’t make sense as the FT,
as mentioned earlier, are one of the few media companies that have weathered
the storm and even thrived in the winds of change that has changed the media landscape
over the last decade.

Nonetheless, expect Pearson to
focus on it growth markets for its education business in Brazil and China as
the North American market ( by far Pearson’s biggest) is showing signs that has
peaked and is set or either stagnation or even decline. In sum, Pearson is
looking become a learning company but flogging off the FT clearly was unnecessary
and is a sign that the company may be moving too fast.

[1][1]
The Guardian, 2015, The Guardian view on media globalization: good news for the
financial Times, http://www.theguardian.com/commentisfree/2015/jul/23/the-guardian-view-on-media-globalisation-good-news-for-the-financial-times

Saturday, July 18, 2015

Check out this great epic trailer for the fourth and last installment of
"The Hunger Games" franchise "The Hunger Games: Mockingjay-Part
2" directed by Francis Lawrence and starring Jennifer Lawrence, Liam
Hemsworth, and Julianne Moore.

Check out this great interview by This Week In Startups as founder and host
Jason Calacanis talks to Brian Hoffman, founder and lead developer at P2P
bitcoin marketplace OpenBaazar and talk about getting backing from Andreessen
Horowitz and Union Square Ventures and much more

Wednesday, July 15, 2015

While it’s no surprise that the Conservative party aren’t fans of the BBC
(British Broadcasting Corporation) and are trying make cuts to the BBC wherever
they can get them, it’s quite a surprise to see how brazen the Conservatives
are in doing it.

Appointing an outspoken critic of the organization in John Whittingdale MP
as the culture secretary two months ago sent a clear message that the
conservative government are planning to gut the BBC and take no prisoners while
they do it.

The BBC is arguably the most popular public institution in the UK save the
NHS and the conservatives are already experiencing backlash as British starssuch
Daniel Craig, Dame Judi Dench and Rachael Weisz sent a letter to Downing Street
imploring the government not to attack and weaken the BBC.

Their pleas however are likely to fall on deaf ears as the BBC may a long
term casualty of a Conservative Party emboldened by a stunning election victory
and solid majority in the House of Commons which puts them in a position to
take on and win public battles to cut popular institutions such as the BBC.

The conservatives have made no secret of their plan to gut the BBC and even
privatize parts of the organization as they see the BBC as wasteful and
inefficient. However, in their luster to cannibalize the BBC, they end up making
arguments as to why the BBC should be left well alone. Whittingdale made the
argument with a straight face that the BBC has no business making popular
programs such as Strictly Come Dancing and The Voice when its competitors in
the private sector could produce them which, needless to say, doesn’t make
sense.

It’s no fault of the BBC that it makes shows the public love and if it
couldn’t make shows the public loved, why would there be a need for it? While
there is a solid argument that the BBC has exceeded its public service remit,
if Whittingdale’s argument gets taken seriously the BBC will be reduced to a British
version of PBS which would make the BBC culturally irrelevant and would rightly
justify calls from Conservatvies to liquidate the beeb altogether.

However, this argument will likely be the one repeated again and again on Newsnight’s,
Question Time’s, parliamentary committee
hearings and every right wing newspaper or blog you can shake a stick at for
months to come until the BBC’s Royal Charter is up. Executives at the BBC see the writing on the
wall and have already agreed to take on extensive costs at the hands of the Conservatives
as according to the Guardian “BBC agreed to pay for free license fees for the
over-75s from 2020 at a cost of £700m a year.”[1] While the BBC has the public (who pay for BBC),
the Labour opposition and just about every creative industry you can think of
in its corner, there will be little in the way of organization’s powerful
enemies taking it apart piece by piece as there will be nothing democratic about
how one of Britain’s most loved institutions will be brought to its knees by a
government dead set on weakening the BBC until it breaks.

The real question would be to ask why the conservatives are trying gut and
raid the BBC despite it being one of the few public institutions that meets its
stated ambitions and the answer is simple, the Conservatives are targeting the
BBC because it is one of the few
public institutions that meet its stated ambitions. The BBC has served as a public
reminder that public institutions can be as good and, in some cases, better
than their private sector counterparts and the Conservatives hate the BBC
bitterly because of it. They’ve hated the BBC for the lion share of its 93 year
insistence and will continue to hate it until they turn the BBC into a slightly
better version of C-Span.

Because of this, the BBC is in serious danger and there’s not much anyone
can do as the BBC’s leadership are fully aware of why the Conservatives are
after them and are fighting as hard as they can to keep the BBC as it is. The
BBC has the winning argument and the public at large on their side as Lord
Hall, Director General of BBC, rightly couched the debate about should decide
the fate of the BBC: politicians with their agendas or the public who keep the BBC
alive and who the BBC was created for in the first place.

In sum, the BBC can only hope that the latter gets involved in the fight
for the future of the BBC before the former get their way.

[1]
J. Martinson, 2015, BBC Fights back against Tory assault on waste and right to
make popular shows, http://www.theguardian.com/media/2015/jul/13/bbc-fights-back-against-tory-assault-on-waste-and-right-to-make-popular-shows

Saturday, July 4, 2015

It might sound obvious to say that we live in a world where time and data
have because just as or even more important to businesses than their bottom
line but looking at Facebook’s recent moves to offer publishers and video
content creators a share of ad revenue derived from their content and the rumors
of the social media giant talking to record labels about video content, it’s
clear that Facebook has taken this observation to heart more than most.

Facebook plan to get content creators on side is obvious as Facebook makes
its money off the time and information their users spend and share on their
site and partnering with publishers and video creators to post content on their
site directly helps Facebook sell its ad inventory to advertisers as their users
spend and share more time and information on consuming the content they love.

Facebook’s strategy puts them in direct competition with YouTube, who are
owned by Facebook’s real competitor, Google. It’s long been predicted that
Facebook would at some point go up against YouTube but it’s a lopsided match up
as Facebook has the huge advantage of not being as dependent on content
creators as YouTube is as Facebook users engage with other as well the content.
YouTube does have a comment section but it’s notoriously hostile and troll
friendly.

Entrepreneur and investor Jason Calacanis was one of the few who saw this
coming and right now must be rejoicing that Facebook is wooing content creators.
Calacanis has been a long standing critic of the Google owned company’s
attitude towards content creators from its revenue stunting 55/45 split to its
tendency to favor its own key metrics over the key metrics of content creators.

Calacanis has also been particularly critical of YouTube’s reliance on Google
regarding attracting advertisers and because of this, content creators are hit
with the double whammy of having no real relationship with either advertisers
or consumers as according to Calacanis ““You don’t own your customers. YouTube
does,””[1].

While Facebook are offering video creators the same 55/45 split YouTube is
offering, Facebook can offer more money despite the split to due to their reach.
Facebook could offer a better user experience and make videos easier to find as
according to Re/code “People don’t have to hunt to find your video — Facebook
will show it to them. And those people don’t need to be following your Facebook
Page, either”[2].

With its deal with HBO, it’s only a matter of time before Facebook make
deals other cable and broadcast networks that see the promise of exposing their
content to the company’s 4 billion a day audience.

In sum, if YouTube executives aren’t scrambling their brains attempting to
come up with ways to compete with Facebook, it better start brainstorming and
quickly as Facebook are clearly coming for blood.

Check out this great interview by This Week In Startups as founder and host
Jason Calacanis talks to bestselling author, journalist, and founder of the
Flow Genome Project Steve Kotler as he talks about science fiction becoming
fact, entrepreneurship, and the future of technology.

Friday, July 3, 2015

With Uber closing down operations in France and two of its executives being
held under arrest, it’s surely time for the Google backed car hailing company
to review its ill-advised strategy of getting under the skin of governments and
taxi drivers across the planet.

Uber has been harassed, harangued and protested by governments and taxi drivers
against in just about every country it’s operates in as the company has
launched operations in countries with the truly naïve notion that the
disruptive and regulatory implications of their service wouldn’t garnered them
the attention of both governments and taxi drivers despite the vitriol and
legal drama the company has faced wherever it went.

Governments and taxi drivers have been all over Uber like a hot rash for a
number of reasons but the main contention has been over Uber’s reluctance to be
pinned down as a taxi service and therefore avoid dealing with the burdensome
regulations that come with it. Uber have consistently described themselves as
an app service which largely doesn’t wash with either governments or taxi
drivers who have to compete with a popular and cheaper service that’s not beholden
to the regulations they are.

Taxi drivers everywhere have cried foul over Uber’s ability to flout
regulations and have taken to the streets as the California based company represents
an extinction level event to their industry. While characterizing Uber as an
extinction level event for the taxi industry might sound hyperbolic, tell that
to French taxi drivers whose protests against Uber turned violent as, according
to The Hamilton Spectator, “100 Uber drivers ha(d) been attacked, sometimes
while carrying customers”[1].

Taxi drivers and fleet around the globe would probably take Uber’s
disruption on chin if Uber played but rules of the road but Uber, intent on
arguing its status as merely an app service that simply connects consumers with
drivers, have other ideas. The reason Uber make this argument beyond actually seeing
themselves as an app service is that Uber don’t want to insure their drivers as
doing so will make insurance costs one of the company’s largest expenditures
and fast. It’s why Uber has had to brave legal battles, bans, and protests in
every country it operates in and the bad press that comes with it as Uber
simply doesn’t want to take on a very large liability.

So far, it’s been Uber’s drivers taking on the insurance liability forcing
drivers to lie to their car insurance providers who’ll likely raise their rates
or potentially drop them altogether. However, Uber will no longer be able to
have their cake and eat it in California at least as thanks to recent changes
in the law, Uber now have to cover their drivers from the moment they use Uber’s
app to the moment drivers turn it off.

Insurance company executives must be jumping for joy in their boardrooms
upon hearing the news of the California law change as it part of a growing
trend of states in the US changing their laws to make sure that Uber insures
their drivers. Uber executives however are likely to have their heads in their
hands wondering why California of late has been tough on them as the
Californian labor commission ruled that Uber drivers were employees as opposed
to contractors.

It’s one thing that states are pushing to make Uber insure its drivers but
recognizing their drivers as employees is literally Uber’s worst nightmare as
insurance is merely a drop in the pool compared to the costs the company will incur
if its drivers are ruled as employees as rulings like this “opens Uber up to
higher costs, including Social Security, workers’ compensation and unemployment
insurance”[2]. Should more states in the
US and countries across the globe make similar rulings, Uber’s business model
will be seriously hobbled by onerous obligations and raise driverless cars a
rungs up Uber’s corporate agenda from a far flung ambition to the organizations
top business priority.

In sum, Uber, despite the bad press, protests, and legal battle have
largely had their own way but with the double whammy served up by their home
state in making them cover their drivers and, more importantly, recognizing
them as employees, Uber could find themselves in real trouble should other
states and countries follow the Californian example.

[1]
The Hamilton Spectator, 2015, French taxis strike after weeks of rising tension
over Uber, http://www.thespec.com/news-story/5695185-french-taxis-strike-after-weeks-of-rising-tension-over-uber/